Dr. Tahseen Mahmood Aslam describes an increasing
Exports Falling – Pakistani exports have been seriously lagging behind imports since many years creating a serious imbalance in financial equation of the country. The pressure exerted by the increasing imports made the financial managers to try to stem the tide through administrative measures and there was witnessed a decrease in imports slightly improving the balance of payment situation. On the other hand, it is reported that Pakistani exports have showed a marked decline causing the financial imbalance to increase being harmful to the national economy. Though economic experts continuously point out that export potential of the country is largely untapped but Pakistani exports saw their bulk going to America, UK, China, Afghanistan and Germany. Policy advisers are optimistic that once Pakistani trade and industry starts employing an efficient mix of inputs that are sourced from domestic and international markets then the prospects of increased exports are very bright but it has so far proved to be wishful thinking.
It is reported that Pakistan’s exports shrank for the seventh month in a row dipping by 14.76 per cent year-on-year to $2.36 billion reflecting fear of massive layoffs in the export sector of the country. In the first nine months of the current financial year exports were down 9.87 per cent at $21.04 billion compared to $23.35 billion in the corresponding period last year. The export proceeds are declining mainly because of internal and external factors raising fears about the closure of industrial units, especially textile, and clothing. Correspondingly, imports dipped 40.25 per cent to $3.82 billion in March compared to $6.40 billion over the corresponding period of last year. In the first nine months, imports fell 25.34 per cent to $43.94 billion this year from $58.85 billion over the corresponding period last year. It was also reported that between the last nine months the trade deficit decelerated 35.5% to $22.9 billion from $35.50 billion over the corresponding months of last year. In March, the trade deficit fell 59.75% to $1.46 billion on a year-on-year basis.
The exports started posting negative growth in the first month of the current fiscal year in July barring August when a slight increase was recorded because of the backlog of the preceding month. The drop especially in textile and clothing, which constitutes more than 60% of total exports shows the government would find it difficult to achieve the export target this fiscal year. The declining textile exports are a result of the federal government’s lack of strategy and inability to prioritise effectively. It is getting clearer by the day that the coalition government is running matters on a day-to-day basis. It is quite obvious that the causes of the export decline include working capital shortages, refunds being stuck such as sales tax, deferred sales tax, income tax, drawbacks of local taxes and levies, technology up-gradation fund and duty drawback. It is pointed out that the faster refund system is not functioning as intended, with refunds now taking 3-5 months to process instead of the promised 72 hours. Additionally, the sector is facing a substantial increase in financial and energy costs.
It is very natural to understand that without addressing these issues it will be impossible for the textile industry to compete regionally on cost and get back on track with exports. It has become difficult for exporters to place orders for the import of raw materials and other inputs procured locally as the State Bank of Pakistan has created hurdles in opening letters of credit leading to a decline in exports. Buyers have withheld their orders mainly because of political and economic uncertainty in the country. It is predicted that exports will fall by 17% in April as the result of discontinued subsidies on electricity and gas for the export sector on 1 March which has rendered Pakistani exporters uncompetitive on the world markets. Exporters believe that one of the main reasons behind falling exports was the exchange rate instability.
Additionally it is pointed out that Pakis¬tan’s exports to the Middle East shrank 14.18 per cent year-on-year to $1.912 billion in the first 10 months the current financial year mainly driven by a substantial decline in exports to the United Arab Emirates. The exports to the region saw a mixed trend with an increase to Saudi Arabia while a decline to other countries of the region. The UAE has emerged as the leading country for Pakistan’s export of goods as nearly 63 per cent of the total exports to the region go to the UAE market alone, however, it suffered a decline of 22.19% to $1.206 billion in 10 months of the current financial year from $1.550 over the corresponding months last year. Out of seven UAE states, the bulk of export was destined for Dubai amounting to $1.087 billion during 10 months of the current financial year against $1.325 billion in the corresponding months last year showing a decline of 17.96%. It is reported that Pakistan’s top export products to UAE include rice, bovine carcasses and half carcasses, men’s/boys’ cotton ensembles, guavas and mangoes. Similarly, Pakistan’s top sectoral exports to the UAE include cereals, articles of apparel and clothing, meat and edible offal.
The second biggest market for Pakistan’s exports in terms of value is Saudi Arabia. However, the exports witnessed an increase of 17% to $404.767 million in 10 months of the current financial year from $345.720 million in the preceding fiscal year. Pakistan’s exports to Saudi Arabia have stagnated at around $500 million in the last decade showing that no significant growth was seen in the market access as compared to the UAE. Pakistan’s top exports to Saudi Arabia include rice (semi- or wholly milled), bovine carcasses and half carcasses, tents and textile materials. Pakistan’s exports to Qatar dipped 13.09 per cent to $141.175 million in ten months of the current financial year from $162.442 million during last year which include rice, bovine carcasses, potatoes, onions, guavas and mangoes. However, one of the most exported goods to Qatar during 10MFY23 remained footballs as Pakistan was the official football supplier to the FIFA World Cup 2022 held in November in Doha, Qatar. Pakistan exports to Kuwait fell by 6.12% to $105.564 million from $112.448 million over the corresponding months of last year.
It is also known that Pakistan’s exports of rice posted a negative growth of 15.82 per cent in the first seven months of the current fiscal year mainly due to the flood devastation of paddy fields in Sindh. In value, the total rice exports dipped to $1.08 billion this year from $1.28 billion in last year. The stagnation in export proceeds, especially of basmati rice, is mainly because of several reasons particularly the under-invoicing of rice to Afghanistan and Iran under the barter trade system. It is estimated that the reduction of rice crop has been registered at 40 per cent and keeping this fact in view the reduction concerned could be justified. The basmati exports in quantity fell by 22.95% to 316,055 tons in seven months of the current financial year as compared to 410,207 tons over the corresponding months of last year. The non-basmati rice exports fell by 24.94% to 1.62 million tons in from 2.17 million tons over the corresponding months of last year. Despite a substantial decline in exports, the prices of basmati and non-basmati increased unprecedentedly in the domestic market. The Weekender